Stirring Up A Hornet's Nest!
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In This Issue.

* Currencies & metals are stuck!.

* N.Z. people say hedge fund guy is wrong!...

* BOAML takes other side of call on A$.

* When will the debt ever be reined in?.

And, Now, Today's Pfennig For Your Thoughts!

Stirring Up A Hornet's Nest!

Good Day! And a Tom Terrific Tuesday to you! How are you today? I realized this morning, as I was making the drive into the office, that I'm forever telling you how I'm feeling, but I never ask you how you are! Of course you don't have to respond, instead, do a quick check on yourself. Feel good? Alrighty then! And if you don't feel good, what will you do to correct that today? Did you see that the Mt. Gox Bitcoin exchange went offline yesterday? Not that I know everything there is to know about Bitcoin, but I'm worried about it, not that I have a dog to hunt in this mess.

Well, I sure stirred up a hornet's nest yesterday when I told you about the Hedge Fund manager that was dissing New Zealand. So, wait just a minute there! I never said that I agreed with him! I merely said that I had been giving you all these bright prospects for New Zealand, and thought it best to give you a different opinion. In fact, I said that we would just have to see who was going to be right on this. Quite a few N.Z. readers fired back notes letting me know that what the Hedge Fund manager was saying was NOT what they were seeing on the ground in N.Z. So, good for you dear readers! Sorry for stirring up the hornet's nest, I was just simply attempting to be "fair and balanced"!

OK. Now that I have that housecleaning caught up, let's get to the meat of what's going on! I sure hope you don't say at the end of the letter today, "Where's the beef?" HA! Yesterday, I was reading some of my friend, The Mogambo Guru's book.. It's always nice to go back in time, through these letters that he wrote, and recall what was going on at the time. For without that record of what was going on, I would have forgotten about what a bunch of dolts the Gov'ts of the world have been in the last decade. And while I would love to quote the great Mogambo Guru, he gets to say stuff in a way that I can't, so, I'll just remind you that if you are interested in reading the great Mogambo's book, you can find it on Amazon.

Well. Yesterday was a quiet day for the currencies and metals, with no real movement either way from the time I went through the currency roundup. There wasn't much in the way of data, as I told you, yesterday, and then not much from the markets, so in the mud we sat, as my two grandsons say, "It's stuck"! Overnight we've not seen much movement either. The euro is attempting to move higher, along with pound sterling, francs and kiwi, but Aussie, Canada and yen are flat or a bit weaker this morning.

I saw an interesting article that will also fall into the category of "fair & balanced" You know how I told you that the boys and girls in the extra large research dept of Deutsche Bank has called for the Aussie dollar (A$) to drop in value from here? (I don't have to remind you that the A$ has already dropped!) Well, the boys and girls from the extra large research dept of Bank of America Merrill Lynch, decided to take the other side of that call by Deutsche Bank and call for a rally in the A$... So, who's hat rack are you going to hang your hat on?

There are quite a few opinions out there on the euro, folks.. I've told what I believe we'll see from the euro this year (a return to 1.50) But, I'm out there on the limb all by myself on that one, for sure! The best one I've seen that compares to mine, is Credit Agricole, who called for "one last hurrah" for the euro rising to 1.40 before falling back to 1.30. I have to tell you that my call simply has nothing to do with the Eurozone's prospects for climbing out of their hole. It's more about how I feel the U.S. dollar will perform, and with the euro being the offset currency to the dollar, you get a stronger euro!

I've given you all the reasons why I believe the dollar will be subjected to daily whippings this year, as the Fed halts tapering, and loses all street cred. There are lots of other things, like interest rates remaining low, and then the Fed falling behind the inflation eight ball, when all the Quantitative Easing blows up in our faces. But that's just Chuck, looking at things through the reality glasses and not the rose colored ones that the Gov't likes the markets to look through.

Well, Canada's Finance Minister, Jim Flaherty, is back in the news today. Sunday, he was dissing the Emerging Markets ability to grow, and yesterday he was talking about things he believes will happen in the next year, which was that the country moved into a surplus position. Should that happen, as Flaherty describes, then the Government's top priority will be to reduce taxes, instead of lowering its debt burden. Hmmm. I hope that works out for him. But in the meantime, the Canadian dollar / loonie is left to deal with low interest rates, a slowing economy, and commodities that saw a disastrous year in 2013.

The Chinese renminbi / yuan saw a tourniquet wrapped around the bleeding that the currency had seen the last week last night, as the daily downward moves in the currency stopped. But it wasn't like the Chinese decided to really turn the tables on the downward moves, with a large upward move. No, instead is was very small, to the upside. But, it wasn't down, and that was a good sign, for now.

In a move that would be viewed as a step toward floating, it is rumored that the Chinese are about to announce that they will move the trading band for the renminbi / yuan to +/-2%. The rumors also include the thought that China is looking for more volatility in the currency.. That's another step toward floating, folks. So, if these rumors prove to be true, we could very well see China stepping up the pace toward floating their currency. It's still a couple of years off, but, it will be here before we know it!

Gold was able to hang on to its $9 gain that I talked about yesterday, throughout the day, and is flat this morning. I think the markets are beginning to catch on to the transfer of Gold wealth from West to East, that I've talked about for months now. (see how long it takes for these guys to catch up sometimes? HA!) With stories like the one I found on Google+ that in China, people are buying Gold like groceries." Pretty crazy, eh? Well, it is, what it is, folks. The people in the East (Asia) think of Gold as a store of wealth, and nothing else. They don't view like a commodity that goes up and down in price, like we do in the West. I think the Asians have this right, folks.

Well, we begin to see data again today, as the U.S. Data Cupboard begins to spill its contents all over the floor this week. Today, we'll see the color of the latest S&P/CaseShiller Home Price Index, Consumer Confidence, and the Richmond manufacturing index.

Yesterday I was reading some research from the Royal Bank of Canada (RBC) and came across some stuff that sounded as if I was writing for them! They took apart the Bad Weather Excuse campers' thoughts that all the rot on the U.S. economy's vine was due to bad weather, and pointed out that the campers shouldn't be so quick to dismiss these reports for they could potentially hold some real underlying weakness.

RBC pointed out that the U.S. economy could be going through a "reversion to the mean" which would mean: Following the rates of growth that, given the fundamentals of the U.S. economy, were never sustainable to being with, the economy is now backtracking.

Remember when I pointed out that the employment survey was finished on the 12th of the month, and I didn't see how that week could have been responsible for the weak jobs #? Well, RBC pointed out that weather couldn't have been to blame for the weak numbers, because that particular week the survey was taken, the temps were mild. They then went to work on Retail Sales, and Housing numbers too. So, at least it's not just me crying wolf here, folks.

Alrighty then. Before I head to the Big Finish today, I want to bring something to your attention that plays along with the thoughts that the U.S. debt problems are beyond correcting at this point, and they'll just keeping growing in size. You know, it's not just the U.S. Gov't that has problems with Unfunded Liabilities, currently running $128 Trillion, and if you listen to professor Laurence Kotlikoff he would tell you that the Unfunded Liabilities are truly closer to: $200 Trillion.

Well, the states all have major problems too, folks. More than 40 states have taken steps in recent years to rein in mounting public pension costs, but pension experts say that while some of those overhauls have whittled state shortfalls, many of them have simply deferred pension costs to the future. And none have come close to closing their pension gaps quickly enough to keep pace with the rapidly aging, and retiring, public work force.

And this is where, I remind everyone that 10,000 Baby Boomers will retire today, tomorrow and the day after that. In fact 10,000 Baby Boomers will retire every day for the next 17 years! Of course they are not all public Gov't employees, but I think you get the picture I'm painting here. The states, and Gov't are doing nothing to deal with these promises. And the debt just keeps piling up for someone to deal with.

For What It's Worth. I found this story on the Bloomberg yesterday, and noticed that Ed Steer has it highlighted in his letter today, so between the two of us we should hit quite a few readers with this today! The story is about the FX rigging role that UBS played, and how they are coming clean with their role, so that they can reduce their potential fines, like they did in the LIBOR rigging scandal.

"UBS AG, trying to reprise its success in limiting fines in a probe of interest-rate rigging, is seeking immunity in the U.S. and European Union as part of the global investigation of currency markets, two people with knowledge of the case said.

UBS saved itself billions of euros in fines in December by disclosing to the EU its role in manipulating the London Interbank offered rate. Now, the bank aims to be the first to report its own conduct in currency markets to European and American regulators, said the people, who requested anonymity because the matter isn't public.

The Zurich-based bank is making its bid for leniency as at least a dozen regulators probe allegations that traders colluded to rig benchmarks in the $5.3 trillion-a-day currency market. The world's biggest banks are under scrutiny, and at least 21 people have been fired or suspended as a result." - Bloomberg

Chuck again. Scandals everywhere! But yet, everyone seems to turn a blind eye ( I have one but my good eye is focused on the scandal!) toward the Gold/ Silver price manipulations. And I've told you why, at least in my opinion, and that of quite a few others now, that the price manipulations continue (it's the Gov't orchestrating them) But, still. In the "old days" investigating journalists would have exposed this by now. And the Gov't would be shamed into stopping.

To recap. The currencies and metals were stuck in the mud yesterday, after I signed off, and some currencies are eking out gains against the dollar this morning, while Gold, is flat. Chuck stirred up a hornet's nest with his attempt to show another opinion on N.Z. and BOAML takes the other side of the call by Deutsche Bank that the A$ will drop from here. China stops the bleeding in the renminbi, and the Chinese citizens are buying Gold like groceries!

Currencies today 2/25/14. American Style: A$ .9030, kiwi .8335, C$ .9030, euro 1.3745, sterling 1.6695, Swiss $1.1275, . European Style: rand 10.7450, krone 6.0295, SEK 6.4920, forint 224.90, zloty 3.0190, koruna 19.8890, RUB 35.57, yen 102.35, sing 1.2645, HKD 7.7615, INR 61.95, China 6.1184, pesos 13.24, BRL 2.3365, Dollar Index 80.10, Oil $102.07, 10-year 2.74%, Silver $21.74, Platinum $1,429.13, Palladium $736.50, and Gold. $1,332.90

That's it for today. Well that was sad news yesterday, when I heard that Harold Ramis, died.. He was a very funny man. Jen, always says her dentist looked like Harold Ramis, so when I heard the news I sent her a text, but she already had heard the news. Did you see the video of the bird that smashed through the windshield of a prop plane? WOW! I'm sure if I were the pilot I would panicked but, the pilot of the plane didn't, and landed safely! WOW! My beloved Cardinals are already reporting injuries at Spring Training! UGH! One of our pitchers got sent home, and that just shows to go you that you can NEVER have enough pitching! Procol Harum is playing Conquistador on the IPod. Everyone associates Procol Harum with the song A Lighter Shade of Pale, especially after it was featured on the movie The Big Chill, but I prefer Conquistador! And with that, I'll get out of your hair today, and get you on your way toward making this a Tom Terrific Tuesday!

Chuck Butler
EverBank World Markets

Posted 02-25-2014 12:35 PM by Chuck Butler
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